Senate panel opposes airline investment change

By John Crawley

WASHINGTON (Reuters) – A Senate committee voted on Thursday
to temporarily block a Bush administration proposal to ease
restrictions on foreign investment in U.S. airlines.

The one-year prohibition on changing the restriction was
placed in a spending bill for the Transportation Department and
other agencies that is now headed for full Senate
consideration.

The House of Representatives approved a similar limitation
last month, meaning it will be harder for congressional
proponents of relaxed foreign investment to prevail as the
legislation moves forward.

The administration says it can push ahead without
congressional consent and plans to do next month before
lawmakers can act to stop it.

Administration officials want to alter the regulation that
prevents overseas investors from influencing domestic airline
operations, including pricing, scheduling and fleet planning.

The administration does not want to change the provision in
the regulation limiting foreign equity at 25 percent voting
stock.

Supporters of preserving the measure say changing it could
undermine the role U.S. airlines play in military airlift
support during wartime and other emergencies.

Administration officials have said military planners are
comfortable with the change and believe the provision, if
enacted, could spur new investment in struggling domestic
airlines and introduce more competition.

Easing the investment restriction is also crucial to
European Union acceptance of an agreement with the United
States to further open up transatlantic air travel, especially
to London’s Heathrow airport.

An “Open Skies” agreement with Europe would boost
competition and help consumers by giving them more travel
options and possibly lower fares, the administration and other
proponents contend.

Labor unions are strongly opposed. They fear any influence
of overseas investors could weaken their position and cost
jobs.

Others, including Sen. Christopher Bond, a Missouri
Republican, said the provision sends mixed signals about
investment policy regarding big companies important to the U.S.
economy.

He singled out General Motors Corp.’s potential interest in
an alliance with Renault SA and Nissan Motor Co. Ltd. to help
it through restructuring as evidence that American business is
open to foreign investment.

United Airlines, which emerged from bankruptcy this year
and has extensive international operations, supports easing the
investment regulation.

Continental Airlines does not support the change because
the carrier opposes the “Open Skies” deal as written.
Continental says there is no guarantee in the treaty that U.S.
airlines will get suitable access to London Heathrow, a
lucrative destination to business travelers. Continental cannot
fly there directly now.